A government under cloud on corruption charges on Tuesday released the draft of a national Public-Private Partnership (PPP) policy seeking to ensure transparency. The ministry of finance released the draft for discussion, while stating it would publish separate mandatory disclosure norms for projects and also set up a dedicated dispute resolution mechanism to address issues related to bidding and award of PPP projects.
The policy talks of risk allocation between the public and private entities, while taking care of the controversial land use issue. Wherever natural resources are provided for a specific use, alternative exploitation of the land will be prohibited and this would be a non-negotiable position, says the draft.
The draft says every PPP project would be vetted at the central government level, even where no capital subsidy is expected to obtain clearance from the relevant authorities. The oversight would extend to the manner of selection of the private entity, procedures observed in releasing payments from time to time and review of quality of service.
Though PPP Approval Committee functions under the finance secretary, its policy making agenda was so far being coordinated by the PPP cell in the Planning Commission. With the finalisation of the policy, the latter might not have much say in PPP norms.
Identification of risks has been given importance. The government would identify different types and degrees of risk during the project lifecycle and configure appropriate mitigation measures.
At the same time, the legitimate concerns of stakeholders would be kept in mind. The draft said the risks that the public sector was more competent to bear in the normal course of its business “would be retained by the public sector”. It also said the public sector would not retain the risk that the private sector had better ability to bear.
The policy said it would support the creation of nodal agencies such as PPP Cells at state or sector levels to look after identifying and approving projects, capacity building and ensuring transparent tendering. Such cells have been in existence for some time.
A provision for competitive dialogue has been kept to deal with complex contracts where an implementing agency is unable to objectively establish the parameters needed to achieve project objectives.
This would involve working together of the implementation agency with likely bidders to explore all possible technical, commercial and legal options and arrive at the optimal solution through an iterative procedure.
The government has also decided to put forward proper guidelines for the officers. It will publish a defined set of PPP rules that will include identification and procurement processes, critical clauses of a contract such as dispute resolution and arbitration.
WHAT IS PPP?
Public Private Partnership means an arrangement between a government and a statutory or government owned entity on one side and a private sector one on the other. It is aimed at provision of public assets or services through private sector investment and/or management for a specified period of time.
Risks will be defined and allocated between the private sector and the public entity. The private sector receives performance-linked payments that conform to specified performance standards, measurable by the public entity or its representative.
Models where ownership of the underlying asset remains with the public entity during the contract period and the project is transferred back to the public entity after the termination contract are the preferred forms of PPP models.